Jan. 13 (Bloomberg) -- Indonesia’s ban on the export of raw
ores will cause nickel prices to rise this year as regulation
limits increases in production of lower-grade nickel pig iron,
Western Areas Ltd.’s Managing Director Dan Lougher said.

“For nickel pig iron in China, the ban is basically going
to cap production,” Lougher said today in a phone interview.
“It’s going to prevent new guys coming on line in China. So it
won’t increase with rising stainless steel demand.”

Southeast Asia’s largest economy, the world’s biggest
producer of mined nickel, is restricting exports of unprocessed
ore as it seeks to become a manufacturer of higher-value metal
products. China, the world’s largest consumer, received about 52
percent of its nickel ore purchases from Indonesia in 2012,
according to an RBC Capital Markets report dated Dec. 19.

Chinese producers of nickel pig iron, a lower-grade
alternative to the refined metal, rely on Indonesian exports as
they require ore with nickel content of above 1.8 percent and
low iron content, Lougher said. Indonesian shipments are mostly
in the form of laterite with 1 percent to 2 percent nickel,
according to RBC Capital Markets. Lower-grade ore from the
Philippines and stockpiled ores will probably be unsuitable as a
substitute or lead to higher production costs, Lougher said.

“We’ll see positive price momentum,” Lougher said. “We
know nickel can move very fast but we expect it to be a steady
momentum upwards as we see the laterite stocks being dwindled.”

Nickel prices may rise to $7.50 to $8 a pound as supplies
are constrained, Lougher said. Indonesia accounts for 18 percent
to 20 percent of global nickel supply according to estimates
from Goldman Sachs Group Inc. Refined-nickel futures jumped as
much as 2.4 percent to $14,190 a metric ton today on the London
Metal Exchange, the highest level in two weeks.

Perth-based Western Areas, which rose 8.9 percent to A$2.56
in Sydney, expects sales to increase by about $34 million for
each $1 a pound gain in the price of nickel, Lougher said.